1,300 Prison Inmates Received $9 Million In Home Buyer Tax Credit

As always happens when the government puts tons of cash up for grabs, scam-happy people will line up to take advantage of it. And a new report says that nearly 10% of the 15,000 folks caught scamming the government for the recent home buyer tax credit were doing it from behind bars.

According to a report issued by the Treasury Dept.’s inspector general, 1,295 prisoners, including 241 serving life sentences, somehow managed to receive $9.1 million in credits, despite being locked up at the time.

The report clarifies that these were not prisoners filing joint returns with spouses in the outside world, so there’s no way these cons could have purchased a home during the period for which the tax credit was available.

In addition to the criminals behind bars, here are some numbers on shady folks living among us:
â€¢ 2,555 taxpayers received $17.6 million in credits for homes purchased before the dates allowed by law.

â€¢ 10,282 taxpayers receiving credits for homes that were also used by other taxpayers to claim the credit. In one case, 67 taxpayers used the same home to claim the credit.

The inspector general wasn’t exactly thrilled about these results:

This is very troubling… Congress created and modified the home buyer credit to stimulate the economy and help taxpayers achieve the American dream, not to line the pockets of wrongdoers.

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And in a statement, the IRS let it be known that they are taking it seriously:

Where there are questionable claims, the IRS has moved aggressively and successfully blocked or denied nearly 400,000 questionable home buyer claims and opened more than 150 criminal investigations… These aggressive efforts have saved taxpayers more than $1 billion.

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An ounce of prevention is worth a pound of punishment, and since they prevented 400,000 people from getting the credit wrongly, it looks like it’s time to punish the 13,000 who cheated and slipped through the cracks the first time around.

And further, I want to point out: 400,000 blocked, 15,000 got through? That’s a failure rate of less than 4%. (To be precise, 3.61% of all [known] fraudulent applications actually got past the watchdogs; the other 96.39% got caught.)

I have to say, the IRS seems to have done a damned fine job of catching MOST of the scammers; a ~96.4% success rate is nothing to sneeze at.

Hmmn, the the post says “among the 15,000 folks who have been caught scamming the government”.

So the balance of the 400,000 claims the IRS has denied or blocked, are not scamming the government?

If the IRS has blocked more than $1 billion in illegitimate claims, sounds like they are doing their job. Now if they (IRS & Congress) could only find a way to close the loopholes that let most major megacorporations pay no tax (or receive billions in rebates or subsidies), now we’d be on to something.

A lot of them pay a bunch. Especially those oil companies that everybody hates. The ones in failing industries or that we chose to subsidize pay little or nothing. And there are strange exceptions (some of the tech companies pay surprisingly little). But really, I hear a lot about how alllll these companies pay no tax due to loopholes. Can you support it a bit more?

Um it’s right there in your graph. GE, Citigroup, Bank of America, all paid pretty much nothing. Also, a company like Chevron paying $8b is also next to nothing, $18b in pre-tax income is bullshit, they make profits like that in a month.

I made an exception for companies in failing industries, who we are subsidizing (Citigroup, BoA, etc). That choice was solely on our elected officials. GE is a strange case. From Forbes (where Mint got the numbers), it does appear that they may be doing intentionally shady accounting for tax purposes. I’ll give you that the jury is out for them. Please support your assertion that the numbers for Chevron are bullshit.

No, you are wrong. The chart you included is tax rate, of which the US is far lower than many companies. Yes, the companies all pay taxes, sadly most don’t pay much to the US. For example, Exxon Mobile (one of the companies we love to hate) paid none.

The Mint infographic used Forbes’ numbers. You’d know that if you looked at both. So, it’s not tax rate. It’s tax paid. Now, Forbes does include an interesting footnote for Exxon that I don’t quite understand, because I’m not a tax professional. If you have any additional information concerning that, I’m open to being better informed.

@ partofme
Here is the note from Forbes:
“None of ExxonMobil’s income taxes were paid in the U.S. In 2008 the company’s income tax bill was $36 billion.”
Note the word “paid.” There are three probable issues here:
1. If you look at the Statement of Cash Flows for 2009, you will see that there is no adjustment for income tax charges for 2009. Maybe they have a tax liability for 2009, but they paid SO MUCH into the system in 2008, that they didn’t worry about making tax payments in 2009. For example: If you overpaid your taxes so much in 2008 that your income tax refund would be about what you expect to owe in 2009, you could just “apply the overpayment to 2009″ and not make any tax payments (i.e. withholding) in 2008.
2. On the Balance Sheet for 2009, you will see “income taxes payable” under current liabilities and something called “deferred income tax liabilities” The first refers to stuff due within 12 months all over the world. The second refers to timing differences created by different systems of accounting (i.e. The IRS might allow them to â€œaccelerateâ€ depreciation expense to the current year [Less tax now and more tax later], but the FASB wants the asset depreciated evenly over its life). So in essence, when ExxonMobil list a â€œdeferred income tax liability,â€ it is saying â€œwe expect to pay this later.â€
3. Lastly, check out the income before income taxes break down in the notes to the financial statements and you will see that only about 7.5% of ExxonMobilâ€™s income is from a U.S. source. (See note 18 of ExxonMobilâ€™s 10K [AKA the financials)
In summary:
1. They might owe taxes for 2009 but did not make any tax payments in 2009.
2. They might be getting tax benefits now while expecting to pay the piper in the future.
3. It is not reasonable to use their full income when comparing tax rates since only 7.5% was U.S. sourced based on their 10K
I hope all this helps!

Thanks! More in-depth explanations like this are exactly why I don’t believe someone who just blindly says, “grumble grumble, these companies don’t pay any taxes, grumble, grumble.” It looks like we’re getting our pound of flesh somehow (be it overflow from last year, or deferred until next year). I do wish that someone like Forbes or Mint would take these fluctuations into account and give us a reasonable estimate of a tax percentage for these companies. I’m sure it’s much too complicated to boil down to a number, but it’s just so hard to have a rational discussion without a simple number or a degree in corporate taxes. No wonder Congresscritters sound like blubbering idiots sometimes. Anyone can whisper any massaged number into your ear, and you’re simply unable to check up on everything yourself.

â€œI do wish that someone like Forbes or Mint would take these fluctuations into account and give us a reasonable estimate of a tax percentage for these companies.â€

True, True. But unfortunately it is very hard to â€œdumb downâ€ tax speak (as you can see from the length of my first response) and news organizations are just looking for headlines.

One thing that may help you is to check out the SEC filings (usually under the investorâ€™s section of a company). Look for â€œForm 10-Kâ€ (you may have to drill down a bit if it has been a few months since they filed). I usually look at the .pdf version. Look for the full income statement and you will see â€œIncome before income taxes.â€ After that you should see the income taxes with a note reference.

When accountants list income taxes on the income statement, those taxes are not necessarily due that year (they are also from all countries, hence the need for a note.) Accountants use something called the â€œMatching Principleâ€ where we try to match expenses and revenues to the same year even if the actual cash flow is different (i.e. you might have incurred an expense via your credit card one month but not have to pay for it until the next month. Your accountant would want you to show the expense in the month of purchase not the month you paid the card). It is similar with income taxes. Even if you donâ€™t expect to pay the taxes for ten years from now, accountants want to match those taxes to the event that caused them. So we expense the taxes this year even though we donâ€™t plan on paying them for many years. This matches your taxes to the events that caused them.

In summary: The taxes on the income statement will show you what taxes were theoretically incurred by the company that year, even if they do not have to pay the taxes for several years. This could be compared to you buying a car in 2009 but (in some alternate universe) you donâ€™t have to pay the sales taxes until 2010. Your accountant would say â€œYou need to show a sales tax expense on you income statement in 2009 even though you donâ€™t have to pay the taxes until 2010.â€ Through this â€œmatching principleâ€ we can get a more precise picture of taxes incurred for the current year. One caveat: as with anything involving the future, the income taxes show involve estimates of things like future tax rates and future income.

One quick thought regarding â€œloopholesâ€: The income tax is designed to tax â€œtaxable income.â€ Taxable income is determined by taking gross income from all sources and subtracting whatever congress says we can. ExxonMobil has a fiduciary duty to its investors to pay as little taxes as legally allowed. No entity should be looked down upon for following the law. As one U.S. judge once said (I am heavily paraphrasing) â€œIf you see a free bridge and a toll bridge, there is no law against taking the free bridge.â€

So you’re saying that ExxonMobil paid NO taxes to the U.S.? No payroll taxes, no sales taxes, etc?

These graphs were just looking at income taxes, and yes, there are provisions in our tax code to reduce U.S. tax debt by the amount paid to foreign nations. Something to do with preventing double taxation.

Example would be:

US Tax Rate: 30%, Europe Tax Rate: 30%. If there wasn’t a reduction, you’d pay 60% in taxes. How would you like it if you had to pay taxes x2, x3, x4? Because we can’t control how other countries handle their tax laws, this is a reasonable thing to do. Heck we ALREADY do this, state-to-state.

Technically if you work one hour in a different state that has income tax, you are required to pay that state the tax on your income there. And then reduce your tax to your “home” state. But under your logic you would be not paying enough in taxes. Granted those states don’t go after most people – just the high profile ones, like sports stars, movie stars, etc.

When you live in a country that keeps 2.5 million people behind bars on any given day, where 1 out of 54 adult males is in prison right now, where the incarceration rate is 10 times higher than other Western industrialized democracies, yeah, you’re going to have a measurable number of prisoners involved in shenanigans.

This story should be about the fact that the US has by far the largest prison population of any country in the world, both in absolute terms and on a per-capita basis): a prison population so large and pervasive that pretty much any group you measure these days is going to have a significant “prisoner” component to it.

And I’d like to see that number doubled or tripled. Don’t we have most of the imprisoned people in the world? With freedom comes the penalties for hurting other people. Possibly, that is the reason for the high percentage. Then there’s countries like China that execute them wholesale and don’t have a high prison population.

We’re so free that we have to put more people in prison? Really? George Orwell, is that you?

Up until 1970 or so, the US had the same rate of incarceration as Canada and Western Europe. Ours skyrocketed, theirs stayed the same. Not coincidentally, TV political ads and 30-second sound-bites starting dominating our political landscape; politicians found that being more “tough on crime” than the other guy was an election-winner, so each round of elections brought another round of ever-more-draconian “tough on crime” measures, with each politician having to champion even tougher laws to top the already tough laws the previous guy championed. That’s how we get to where we are today, with crazy mandatory-minimum sentencing laws, bloated prison-guard unions successfully lobbying for more prisoners, and even corporate privatized prisons giving kickbacks to judges who give harsh sentences. The US prison population has increased by a factor of five since 1970, politicians are still running on platform of “we need even tougher laws”, and we the people still fall for it.

Thank you for clearing that up for me. Here all this time I thought people were being put in jail for breaking the law. Nope, it’s just those pesky politicians and unionized prison-guards going out and rounding up good ol’ minding their own business citizens.

Funny, I’ve never been incarcerated. I wonder if that’s because the politicians and guards just haven’t gotten to me yet or it is because I don’t commit crimes? Hmmm… That’s a real head scratcher.

And, obviously, Americans have simply become five times more criminal since 1970. Indeed, Americans have become five to ten times more evil than Canadians and Western Europeans since 1970.

Various out-of-control political pressures to legislate ever-higher sentences have nothing to do with the fact that America’s incarceration rate has skyrocketed ahead of all of our peer countries in the past generation. We’ve just become a much more delinquent nation, that’s all.

Actually, Canada has a ‘better’ and more efficient criminal system far more based on rehabilitation than sheer punishment. The USA also has some pretty brutal minimum stay laws, most likely due to “It’s not working, increase the sentences”. I don’t give a flying F! Jerks are out there burglarizing, raping, robbing, etc. F them! Lock them away forever (3-strikes) so long as my family doesn’t have to be victimized. And yes, very quite literally, becoming Draconian. (and no, I am not a troll)

People in this country have opportunity, even the poorest people. (I know, I was very poor). There is no excuse to get hooked on drugs, sell drugs, join a gang or just become a walking crime wave. I know there are no political points for rehabilitation programs and that’s too bad. These people made their life decisions at the expense of many, many others. Lock them up and toss the key.

“Indeed, Americans have become five to ten times more evil than Canadians and Western Europeans since 1970.”

I’ve lived in both Eastern and Western Europe (as well as the US, of course) – they seem to be missing a certain culture that is abundant here: the culture that glorifies criminal behavior, and the justice system that makes excuses for those who engage in criminal behavior.

If anything, given that the criminal recidivism rate is somewhere around 80%, we are not nearly as harsh as we should be.

We don’t need tougher laws, but actual enforcement. Prison isn’t that bad, and has ceased to be a deterrent anyway. I know I’ve lived in worse conditions for longer periods, as have many criminals, so I can see how incarceration isn’t much of a deterrent, except for opportunity cost lost being able to make more (illicit) money on the outside.
I agree that unions of detainment related jobs are a bad thing, and that having a large inmate percentage of the population isn’t good, but there does need to be a certain percent in there – caveat: not as a quota, but there are people who if given an opportunity to acquire more for themselves outside the law will do so every time, and a smaller percentage that will do immoral things regardless.
Scamming a fraud are a part of any successful (or unsuccessful) economy, and you’d be on a difficult search to find somebody who doesn’t thing that the rate among prisoners wouldn’t be higher that general population to give some scam like this a shot. Look at the at least 240 serving out life sentences who succeeded in scamming us taxpayers out of this, what did they really have to gain from this?

We need to do better at rehabilitation, but we also need to make prison more of a deterrent. Sherrif Arpaio in Yavupai county has made a political circus out of his prisons, but the least noted fact is that recidivism has plummeted, and the demand for guard jobs hasn’t skyrocketed, or nor has cost to taxpayers.

This is just a case where taxpayer money spent on a legitimate government task with poor oversight (keeping a population necessarily separate because of their past actions) has indirectly led to taxpayer dollars spent through an unconstitutional government program has ended up benefiting only criminals.

Hm- I’m not in jail and I still haven’t received my $8K yet. I got audited on only this credit and I still haven’t seen my money- I guess mail-in rebates with the US government aren’t much different than other companies.

I can’t help but see that last sentence as childish. ‘Evil’ car and energy companies are organizations that hire mostly hardworking decent modestly paid workers, whereas the incarcerated populations who succeeded in these scams have already been convicted of other crimes.

A certain rate of scamming and wrongly allocated funds is an expectation, but the scale of .gov’s failure to prevent these cases demonstrates that they were never properly equipped to handle this procedure in the first place, and that oversight was bungled from the start.

Who said anything about socialism? The money in question here is a TAX CREDIT. This is not some government hand-out to the needy. It is tax money credited to you by the government in exchange for BUYING A FREAKIN’ HOUSE. It’s about as capitalistic as it gets.

The good thing is that once these people are audited for the home buyer credit, they’re also likely caught for other credit scams like child tax credit. So the government’s total $ saved may be reflecting that. Not sure.